Has Baker Hughes Finally Turned the Corner?

If Baker Hughes can improve internationally while waiting for North America to rebound, the stock should work.

NEW YORK ( TheStreet) -- Shares of oil services company Baker Hughes ( BHI) have seen a slight uptick ever since the company's first-quarter earnings announcement.

While there are still concerns about the overall health of the oil industry -- which has been marred by slumping prices and weak rig counts -- analysts at Credit Suisse think Baker Hughes has turned the corner following years of reorganization. But is the stock worth $54 per share, which suggests a 25% premium from current levels? Credit Suisse believes it does.

However, the cynic in me won't forget that the same level of optimism was also proclaimed for 2012. Instead, things got worse. To date, the industry has suffered five consecutive quarters of falling rig counts. I suppose Credit Suisse feels that this quarter reflected a bottom in the decline. In many respects, there was some evidence to support this theory. But I still want to be cautiously optimistic here.

The better approach on Baker Hughes would be to wait and see. That's not a slight. While Baker Hughes looks meaningfully improved, the company still lacks the punching power of Schlumberger and Halliburton. I don't think the first-quarter report, which included a 2% decline in revenue, did enough to merit higher optimism -- not when Schlumberger posted 8% year-over-year revenue growth.

For that matter, even though Halliburton didn't excite the Street, the company still posted a modest year-over-year increase. So what exactly is Credit Suisse seeing in BHI that I'm not? My guess is it is looking at the fact that of the three, Baker Hughes was the only one to post sequential growth, albeit by less than 1%, which supports the "bottom" theory.

In other words, Baker Hughes can't get any worse from here. Still, does it deserve 13% increase in the share price, especially when net income declined 30% year over year? This is where Baker Hughes can benefit from better diversification as North American weakness really took a toll on the company's performance. Granted, the company is working hard to build its international market position. But with North America being such an overhang, I'll feel much better to see those efforts accelerated.